On Wednesday, oil futures fell; U.S. benchmark prices on track to show a fourth consecutive session drop as investors considered the possible influence of President Donald Trump’s energy plans and tariff threats.
Price shifts
— West Texas Intermediate crude CL00 for March arrival Posting losses in each of the last three trading sessions, CL.1 CLH25 dropped 37 cents, or 0.5%, to $75.46 a barrel on the New York Mercantile Exchange.
At $79.07 a barrel on ICE Futures Europe, March Brent crude BRN00 BRNH25, the worldwide standard, dropped 22 cents, or 0.2%.
While February heating oil HOG25 fell by 0.9% to $2.5346 a gallon, February gasoline RBG25 slid by 0.9% to $2.0646 a gallon.
Up 0.9%, natural gas for February delivery NGG25 traded at $3.791 per million British thermal units.
Market motivators
“Exacerbated by policy uncertainty during Trump’s first days in office,” said Daniela Hathorn, senior market analyst at Capital.com, recent movement in oil prices has been skewed to the negative.
” Fundamentally, Trump’s broad policies to maximize U.S. oil and gas production pose possible challenges for oil prices, as increased domestic supply may weigh on the market,” she said in market commentary.
Notwithstanding former President Joe Biden’s attempts to move away from fossil fuels, U.S. companies have kept drilling at record rates, “capitalizing on elevated prices following sanctions on Russian exports,” said Hathorn. “This activity implies that spare production capacity may be limited, so providing a degree of support for oil prices.”
As U.S. traders returned from a public holiday and assessed Trump’s declaration of a national energy emergency and other policy-related actions, which could increase U.S. supplies over the long run, oil plummeted Tuesday.
“From the supply side, Trump’s declaration of a national energy emergency and his advocacy of energy independence have been main causes of bearish momentum. His proposals would make the United States a net energy exporter, which would have long-lasting effects on world oil prices,” Pepperstone’s research strategist Dilin Wu noted in a note.
Declaring a “national energy emergency” on Monday, Trump signed an executive order accelerating approval of oil and gas output. He also pulled the United States from an international accord aiming at combating climate change. In his inauguration speech, Trump declared his government will be filling the Strategic Petroleum Reserve—which was drastically depleted during the Biden presidency.
Trump has also threatened to put a 25% tariff on goods from Mexico and Canada. U.S. refiners heavily consume Canadian crude, which cannot be readily replaced. Applied to oil, a tariff would impact roughly 4.5 million barrels, or around 70%, of daily U.S. crude imports, according to Commerzbank.
“Short term, the path of the oil market may be mostly shaped by the direction of Trump administration policy. Traders will evaluate the mix of economic development, energy security, and policy concerns as more specifics about energy output and trade deals surface,” Wu said.
Monday’s Martin Luther King Jr. Day holiday will cause delay in data on U.S. petroleum supplies from the Energy Information Administration this week. Thursday at noon Eastern time will see the publication of the report.
